L’Oreal Confirms 2012 Goal as Sales Disappoint Some Analysts

By Andrew Roberts -
Nov 6, 2012

L’Oreal SA (OR), the world’s largest maker
of cosmetics, reported third-quarter sales that disappointed
some analysts as growth slowed more than expected, particularly
at the professional products division.

Revenue climbed 4.6 percent, excluding currency shifts and
acquisitions, Paris-based L’Oreal said today in a statement
after European markets closed. The average of five analysts’
estimates compiled by Bloomberg News was for 4.9 percent.

L’Oreal’s quarterly growth was weaker than most of its
major beauty and personal care peers, including Unilever and
Estee Lauder, whose beauty divisions grew 8 percent and 6
percent respectively, according to Andrew Wood, an analyst at
Sanford C. Bernstein.

“L’Oreal has now seen growth below 6 percent in 17 of the
last 19 quarters, providing further support to our thesis that
L’Oreal is no more than an average beauty and personal care
company,” Wood said by e-mail. A 0.1 percent gain in sales of
professional products such as Kerastase hair care was the lowest
quarterly growth since 2009 on an organic basis, according to
the analyst.

The third quarter “wasn’t fantastic,” said Eamonn Ferry,
an analyst at Exane BNP Paribas, in an e-mailed note. “We would
not be surprised to see some modest downward pressure on the
shares tomorrow.”

Low Point

The professional products division’s performance was “a
low point” and should improve starting in the fourth quarter,
as should the rest of the business, Chief Executive Officer
Jean-Paul Agon said on a conference call.

Revenue reached 5.52 billion euros ($7.07 billion), L’Oreal
said in the statement, exceeding the 5.48 billion-euro average
of 10 analysts’ estimates. The maker of Kiehl’s lip gloss aims
to outperform the global cosmetics market, which it expects to
expand about 4 percent this year.

“Despite the market slowdown observed in Asia and in
travel retail, L’Oreal Luxe is proving highly dynamic,” Agon,
who is also chairman, said in the statement. “We confirm our
targets for 2012, and our ambition to achieve another year of
growth in sales, results and profitability.”